Question

The Cinci Company issues $100,000, 10% bonds at 103 on April 1, 2020. The bonds are dated January 1, 2020 and mature eight years from that date. Straight-line amortization is used. Interest is paid annually each December 31. Compute the bond carrying value as of December 31, 2023.

Answer 1

Answer:

$101,593.75

Explanation:

Total amortization period  = 8 Years = 8 x 12 = 96 months

Number of months of Amortization =  9 months in 2020 + (3*12 months) till 2023 = 9 months + 36 months = 45 months

Premium on bonds payable = Issue Price - Face Value

Premium on bonds payable = ($100,000*103%) - $100,000

Premium on bonds payable = $103,000 - $100,000

Premium on bonds payable = $3,000

Unamortized premium  = Premium on bonds payable - Amortized premium

Unamortized premium  = $3,000 - $3,000*45/96

Unamortized premium  = $3,000 - $1,406.25

Unamortized premium  = $1,593.75

Carrying value on December 31,2023 = $100,000 + $1,593.75

Carrying value on December 31,2023 = $101,593.75